The proposed P&O Princess merger with Royal Caribbean is officially kaput. Following a series of dramatic, executive-suite negotiations, P&O Princess has welcomed Carnival's offer. Carnival is announcing today it has offered P&O Princess a "pre-conditional proposal to enter into a DLC structure."

In a nutshell?

*P&O Princess has withdrawn its recommendation of the merger it had agreed on last November with Royal Caribbean.

*Carnival has increased its offer for P&O Princess and found a way to reshape its acquisition proposal so that it's more palatable to United Kingdom shareholders. According to a Carnival statement, the "dual listed companies" proposal (DLC) not only provides P&O Princess shareholders with the superior economic terms of our increased offer, but also enables them to retain their UK listed shares and to participate in the only dual listed company that will be included in both the FTSE 100 and the S&P 500."

*And yet: Carnival's proposed offer is not a done deal. It's still up to P&O Princess shareholders to decide. CEO Peter Ratcliffe has said the next general meeting will likely be scheduled for February 14, 2003. Until that time, P&O, which can't technically even recommend the offer to shareholders until January 1 (news announcements today are focusing on P&O Princess' withdrawal from the Royal Caribbean arrangement). And, P&O can, technically, also welcome offers from other companies.

*It's a sad day for Royal Caribbean, with Chairman Richard Fain acknowledging defeat in a company-issued statement: "Clearly, we regret that the Board of P&O Princess is taking this action. We remain today as convinced as ever that the pairing of our two companies would be a great partnership and a great business. Ultimately, it is the shareholders of P&O Princess who must decide what is best for their company."

*As compensation, Royal Caribbean has received the $62.5 million "break fee in its original merger agreement with P&O Princess.

*Once the proposal is officially made, the P&O Princess board has until January 10 to decide whether or not to recommend it to shareholders.

*And, finally...if the board recommends Carnival's DLC to shareholders...and if...shareholders vote yea for the deal, look for the two companies to begin dual-operating in first quarter 2003. In a statement today, Carnival CEO Micky Arison said "We intend to invite representatives of P&O Princess to join the Carnival board and believe there will be significant benefits in sharing the best practices of the two management teams across our combined enterprise. P&O Princess and Carnival shareholders can both participate in the future of a combined business, which will be one of the most exciting and dynamic in the leisure industry."